South Korea’s inability to reduce income inequality is fueling social instability and populism in Asia’s fourth-largest economy, a report by a state-run think tank showed Monday.

The report by the Korea Development Institute said Asia’s fourth-largest economy had succeeded in reducing the earnings gap up until the early 1990s, but this trend was disrupted by the 1997-98 Asian financial crisis. It claimed that the country has only made limited gains in reducing polarization.

“Greater earnings disparity effectively hinders social mobility and this inequality creates an environment where the wealth of the country is centered in a small percentage of the population,” the report said.

It warned such circumstances can cause the public to call for populist policies and trade protectionism that could be detrimental for the country’s long-term growth.

The KDI said that compared to other Organization for Economic Cooperation and Development countries, Seoul’s outlays in education, health care and other social welfare areas were small.

Outlays in these areas totaled 8 percent of the country’s gross domestic product, compared to an average of 13 percent for other OECD members.

The latest findings based on overseas data showed the average Gini coefficient index of the OECD reached 0.31 at the end of the last decade compared to 0.28 in the mid-1980s.

The Gini index measures inequality in income distribution. The closer a reading is to 1, the greater the wealth imbalance. 

(Yonhap News)